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The Luddites were sometimes right. Technology might be a good thing in the long run, but in the short run there are casualties. Actually, there are always casualties, but it’s possible that innovation has sometimes created economic depression before it created something special. It may be like that today, and 3D printing is a prime example.

Consider the age of symmetry. It lasted from around 1867 to 1914, and was perhaps the golden age of innovation. In fact, if you look at the history of innovation from learning how to tame animals to the Internet, it is possible that more innovation occurred in that half a century or so than throughout the rest of history put together. Yet 13 years later, the US entered the Great Depression, and the global economy limped forward into world war. It may have been a coincidence of course, but then again, does it not kind of make sense that innovation can create economic hardship?

Innovation can increase productive potential, but without a corresponding rise in demand the result of innovation may be fewer jobs. Fewer jobs mean less demand and things can become worse.

This does not mean innovation is bad and always destroys jobs; it just means that it can, under certain circumstances, particularly if the government does not try to counteract the negative impacts of innovation with stimulus. Maybe this has been happening of late. It does feel as though modern technology has left two types of jobs: the highly paid skilled jobs, and the manual jobs, such as cleaning. There is little in the middle.

And that brings us to the next wave of innovation: nanotechnology to the internet of things, might not these changes cut though the economy like a sickle though grass?

Take 3D printing: it’s hard to see how this can do anything but destroy jobs. It is hard to see this, but not impossible.

3D printing may provide the opportunity for local craftsman, experts in CAD, design, and materials to provide bespoke products for the customer, at a price that puts such products in reach of the mass market.

A similar point was made here the other day. See 3D printing: game changer or just fair game for the cynics?
It was good to see others drawing similar conclusions. Kevin O’Marah of SCM World recently wrote “Store-based retail is getting killed by Amazon-addicted consumers whose loyalty is paper thin. Suppose, however, that stores did more than just carry product.

Additive manufacturing (aka 3D printing) has the potential to custom-make many consumer products given progress in the materials sciences that will go from simple resins to metals, ceramics, fabrics and more. Add some well-trained staff and the store could be a place where consumers come to solve problems and experiment with ideas. Imagine the retailer REI deploying these ideas for its ultra-loyal outdoorsy customer base – it’s not hard to see how this beats Amazon.” See Futureworld: 3D printing is the tip of the iceberg

Maybe 3D printing won’t just have one effect, but will have different effects at different times, and in different sectors. It may lead to job losses and a recession for a while and in some regions, but it may also ultimately create a huge number of skilled and well-paid jobs, creating more wealth for most of us.

The economist Robert Gordon opened a can of worms a year or so ago when he suggested that technology is having a limited impact upon the economy; that the computer revolution is not increasing wealth like the industrial revolution or the move towards mass production did in the early 20th century. In short the good days are behind us. But is that really right?

Other see it in terms of low hanging fruit. They say we have picked the fruit that can create economic growth the easy way. The growth period supported by carbon fuels may be approaching its end – or maybe the end will be delayed if the hype about shale gas is to be believed – and this era of growth is coming to an end. But is that really right?

Capital Economics pointed out that it took 60 years before the steam engine invented by James Watt in 1769 materially boosted productivity. If history teaches us one thing, it is that there is a time lag between innovation and growth.

Sometimes we even get economic depressions in-between, as happened between the innovation we call mass production and the post World War 2 economic boom.

So to say that the computer has not created growth and neither will it, does seem to be a bit hasty.

The thing about technology that economists often forget is Moore’s Law. Computers are getting more powerful all the time and, as this happens, their potential to influence growth rises. Sometimes technology can steadily increase in power, but we barely notice it until it passes a kind of breakthrough point. When that happens we start to notice it more and more.

Apple is a good example. Steve Jobs had a dream of combining design with technology. But this was only really viable once technology had passed a certain level; a level it may have passed in the early years of the 21st century. And then the company went from flirting with bankruptcy to the biggest in the world within just a few years.

Certain burgeoning technologies may suit the UK rather well.

Take biotech. The industry is on the verge of some seriously major breakthroughs. And in this industry, the UK is the world leader.

Or take 3D printing. Critics make the same mistakes economists often make when they forget about Moore’s Law. This is a burgeoning technology, which is set to become steadily more powerful and relevant. The 3D printer costing £699 and for sale in Maplin may help users to replace missing chess pieces or new cases for their phones, but future 3D printers will do an awful lot more. NASA is funding one project to make a printer than can create a pizza from powders. It may be only a matter of time before one can say to a printer: “Tea, Earl Grey, hot.”

But 3D printing may transform industry in a way that is just as radical as when mass production took off, but this time it may work in reverse. Manufacturing may return to local craftsmen; even to the High Street as it becomes possible to have bespoke clothes, furniture, even cars made without necessarily paying more money.
Debt matters, but it matters less if your income is growing. It matters even less if the percentage interest on debt is less than the percentage growth in income.

Many critics say we face a debt crisis, that the economy is about to implode. But they forget about technology. And their error may be dangerous. If we try to cut debt at a time of innovation, the result may be falling demand at a time of rising productivity.

The debt hawks may mean well, but their belief that we must suffer pain before we can see recovery may be both wrong and dangerous. If we try to cut debt, with a resulting fall in demand at a time of rising productivity, the result may be an economic depression of great severity. The arch bears may be right in prophesying doom, but they may be right for entirely the wrong reasons.